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05.02.2025 11:25 AM
Stock Market on February 5: S&P 500 and NASDAQ Continue to Experience Turbulence

Futures on American and European stock indices declined, diverging from gains in the Asian markets, as investors attempt to assess the trade war and its potential impact on the profits of major Wall Street tech companies.

Euro Stoxx 50 futures dropped by 0.4%, and S&P 500 futures fell by 0.5% following sharp declines in Google's parent company Alphabet Inc. and Advanced Micro Devices Inc. during yesterday's main trading session.

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Asian indices rose for the second consecutive day, while Chinese stocks fell as trading resumed on Wednesday after the Lunar New Year celebrations.

The yen strengthened against the U.S. dollar, and gold hit a record high amid growing demand for safe-haven assets.

Impact of U.S.-China Trade Tensions:

Asian tech companies mirrored the decline of their American counterparts just as investors became more cautious regarding China. This came after the U.S. imposed 10% tariffs on all imports from the Asian nation. The first in this renewed trade war between the U.S. and China suggest that Xi Jinping is taking a more cautious approach than he did during Donald Trump's first term.

However, delays in trade negotiations between the two countries may lead to short-term volatility in the stock markets, increasing pressure on the S&P 500 and Nasdaq.

Bond Yields and Dollar Weakness:

10-year Treasury yields and the U.S. dollar index continued to fall after U.S. job openings in December decreased more than expected, reaching a three-month low.

The employment data eased concerns about an aggressive Federal Reserve stance on interest rates, which led to dollar weakness, providing a tailwind for Asian markets.

Investors may now adopt a wait-and-see approach regarding the U.S.-China trade war, shifting their focus to broader economic indicators.

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Key Data to Watch:

Today's focus will be on the U.S. ISM Services PMI data to gain further insight into the Federal Reserve's interest rate path.

Economists note that service sector activity likely slowed in January due to winter storms across much of the country and wildfires on the West Coast. The ISM services data will also help assess the current state of the economy and the direction of monetary policy.

Economists expect moderate growth in the indices, but adverse weather conditions could negatively impact the results. If the ISM data reflects a slowing growth trend, the Federal Reserve may reconsider its interest rate projections, influencing financial markets accordingly. An important factor will be employment trends in the services sector, which could indicate whether consumer confidence remains intact. Sustained job growth could support a recovery, even if weather conditions remain challenging.

Commodities:

Oil prices declined slightly as concerns that the trade war might harm global growth outweighed announcements of tightened sanctions on Iran.

Technical Outlook for S&P500:

Demand for the S&P 500 remains high.

The primary target for buyers today is to break through the nearest resistance at $6024. This would help continue the upward trend and open the way for a push to the next level at $6038.

An equally important objective for the bulls is maintaining control over $6047, which would further strengthen their position.

In the event of a downward move due to declining risk appetite, buyers will need to assert themselves decisively to maintain momentum.

Jakub Novak,
Analytical expert of InstaForex
© 2007-2025
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